USA Gymnastics, Short on Funds to Pay Sex-Abuse Claims, Files for Bankruptcy

By , Allison McNeely and Josh Saul | December 6, 2018

USA Gymnastics, under threat of being decertified by the U.S. Olympic Committee, filed for bankruptcy after running short of funds to pay victims of Larry Nassar’s sexual abuse.

The organization filed for Chapter 11 status in the Southern District of Indiana on Wednesday with estimated total assets and liabilities of $50 million to $100 million, according to a court filing. USAG aims to continue operating while it settles the victims’ claims, which its says are covered by insurance previously purchased by the organization, according to a statement.

But in court filings, USAG said there may not be enough to go around. It estimated the potential impact of these lawsuits at $75 million and $150 million, while the organization has assets of just $6.5 million in cash and investments, and said that the insurance policy might prove insufficient.

“We owe it to the survivors to resolve, fully and finally, claims based on the horrific acts of the past and, through this process, seek to expedite resolution and help them move forward,” chair Kathryn Carson said in the statement.

The bankruptcy extends a tumultuous year for USA Gymnastics, which installed new leadership after the trial of former team doctor Larry Nassar. Nassar was sentenced to 60 years in federal prison on child pornography charges and another 40 to 125 years in prison for a decades-long string of sexual abuse. His victims number more than 150 current and former gymnasts, including several Olympic champions.

Raisman’s Claim

The amount of insurance proceeds available isn’t affected by the Chapter 11 filing, according to the statement, but it added, “USA Gymnastics has no other significant assets that could be used to pay claims.” The bankruptcy filing showed the organization has 1,000 to 5,000 creditors.

One of the unpaid creditors listed is Olympic gold and silver medalist Aly Raisman, who has spoken out about her abuse by Nassar. The filing didn’t specify an amount, and a representative for Raisman didn’t immediately respond to a request for comment.

One of the largest unsecured claims is a disputed $340,000 in severance for Stephen Penny, the former president of USA Gymnastics, who was indicted in connection with the scandal.

The outcome may follow the pattern in the bankruptcy of the Weinstein Co., the film company that went bust after sexual misconduct allegations leveled at Harvey Weinstein, according to Ted Gavin, a turnaround consultant at Gavin/Solmonese and president of the American Bankruptcy Institute.

No Shelter

The court filing, which normally suspends all claims, might not halt litigation against individuals for their roles in perpetuating or covering up the abuses, Gavin said in an emailed statement. “All bets are off here,” he said.

U.S. Olympic Committee spokesman Patrick Sandusky said in an emailed statement that the organization is “reviewing the effects of the bankruptcy filing on the pending proceeding to revoke USA Gymnastics’ recognition.”

While USA Gymnastics said the filing should help it move forward with the USOC, the national governing body remains unconvinced that this will solve the problems that spurred the decertification process. Speaking at an event in New York City on Wednesday, Chief Executive Officer Sarah Hirshland said those proceedings will continue as scheduled.

“It does not change our perspective or our commitment to that process,” Hirshland said. The bankruptcy is less about financials and more about an attempt to resolve all the pending litigation, she said.

The case is USA Gymnastics, 18-09108-RLM-11, Southern District of Indiana.

Editor’s Note: Among the insurers identified in previous filings in USA Gymnastics cases are:


Also, USA Gymnastics created a page with questions and answers on the bankruptcy filing and what it means. Included on the page is this question/answer:

How does the Chapter 11 filing specifically impact the claims of the survivors?
The survivors’ claims against USA Gymnastics are covered by insurance previously purchased by USA Gymnastics, and the amount of available insurance proceeds (which is still being determined) is not affected by the Chapter 11 filing. We believe that the Bankruptcy Court is the best forum in which to implement appropriate procedures to equitably resolve claims and allocate the insurance proceeds among claimants, allowing resolution more quickly than litigation filed in courts around the country.

Topics Claims Abuse Molestation

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